Will Tariffs Slow U.S. Solar PV Growth?

SolarTAC test facility in Aurora, CO

Source: NREL

2013 is shaping up to be another record year for U.S. Solar installations according to the Solar Energy Industries Association’s (SEIA) Q3 U.S. Solar Market Insight Report.  The third quarter of 2013 was the second largest in U.S. history with 930 MW of solar PV installed.  Overall, SEIA forecasts that 4.3 GW will be installed in 2013; a 27% increase over 2012 levels.  Delivered solar electricity prices continued to fall in 2013 as well.  According the National Renewable Energy Lab the cost of utility scale solar dropped 20% to just over 11 cents per kWh in 2013 (see chart below).  Electricity prices vary greatly by state, but solar PV has already reached grid parity for residential and commercial customers in 10 states (Solar PV at Grid Parity in 10 States According to Deutsche Bank).   There are ongoing efforts to drive the cost of solar down even further.  The Department of Energy’s SunShot Initiative  has set a goal to reduce the cost of utility-scale solar PV to 6 cents per kWh by 2020.

All the solar news is not positive; the ongoing anti-dumping dispute between U.S. and Chinese solar manufacturers has the potential to slow U.S. solar growth.  On February 14 the U.S. International Trade Commission issued a preliminary ruling that enables the U.S. Commerce Department to apply preliminary tariffs to Chinese solar panels made with Taiwanese solar cells, if they are found to harm the U.S. solar industry.  In 2012 the U.S. Commerce Department placed sizable tariffs on Chinese solar panels due to a finding of unfair subsidies and dumping practices.  In order to avoid these tariffs Chinese solar companies employed a tolling strategy: manufacturing solar panels with Taiwanese solar cells.  If the Commerce Department decides to level these new tariffs it will render the tolling strategy ineffective and close a major loophole in the tariff regime on Chinese solar panels.

As we can see from the chart above most of the decline in the cost of solar over the past here years has been due to declining solar module prices.  If the new tariffs close the tolling strategy loophole this could slow or even halt the decline in solar system prices and negatively impact the pace of solar installations in the U.S.  In the short term, the price impacts of tariffs may be mitigated some by developers who want to ensure they capture the 30% Investment Tax Credit before it drops to 10% in 2017.  The International Trade Commission is scheduled to make a preliminary decision on unfair subsidies on March 28 and on dumping practices on June 11.